Thursday, October 23, 2025-Tesla reported record-breaking vehicle deliveries this quarter, but profits still fell short of Wall Street expectations as rising production costs and fading government incentives weighed heavily on the company’s bottom line.
Despite selling more than 500,000 vehicles — a new quarterly high — the automaker’s profit margin dipped as raw material expenses, logistics challenges, and higher labor costs cut into earnings. CEO Elon Musk acknowledged the pressure, citing what he called “a tough balancing act between affordability and innovation.”
Investor reaction was swift. Shares of Tesla dropped more than 6% in after-hours trading following the earnings call, as analysts expressed concern over shrinking margins and the company’s reduced reliance on environmental credits, which once provided a steady boost to profits.
While demand for Tesla’s Model Y and Cybertruck remains strong, some analysts fear that competition from Chinese EV makers and legacy automakers is eroding Tesla’s dominance in the electric vehicle market.
The report underscores a changing landscape for the EV giant as global subsidies for clean cars decline and operational costs climb. Musk emphasized ongoing investments in AI-driven manufacturing, battery advancements, and self-driving technology as key to long-term profitability.
But as the industry faces slower growth and tighter credit conditions, Tesla’s next few quarters may prove critical in determining whether record sales can once again translate into record profits.
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